Gross Profit Calculator
Calculate gross profit, gross margin, cost of goods sold, required revenue, or unit economics. This tool focuses on the direct cost of producing or purchasing what you sell before operating expenses are deducted.
Gross profit and gross margin formulas
- Gross profit:
revenue - cost of goods sold. - Gross margin percentage:
(gross profit / revenue) x 100. - Cost of goods sold percentage:
(cost of goods sold / revenue) x 100. - Required revenue for a target gross profit:
target gross profit / gross margin as a decimal. - Unit gross profit:
selling price per unit - direct cost per unit.
If revenue is 100,000 and cost of goods sold is 60,000, gross profit is 40,000 and gross margin is 40%. That does not mean the business earned 40,000 in net profit because operating costs still need to be paid.
What belongs in cost of goods sold?
The answer depends on the business and its accounting policy. Typical direct costs can include product purchase cost, manufacturing materials, production labor, inbound freight, packaging, and other costs directly tied to units sold. Rent, general administration, advertising, interest, and income tax are normally evaluated after gross profit rather than included in this simplified calculation.
Use consistent cost classifications when comparing periods. Moving a cost between cost of goods sold and operating expenses changes gross margin even when total profit is unchanged.
Gross profit is not net profit
Gross profit shows how much revenue remains after direct product or service costs. Net profit goes further by subtracting operating expenses and other applicable costs. A strong gross margin can provide room to pay overhead, but it does not guarantee that the business is profitable overall.
How to use the result
- Compare products using both unit gross profit and gross margin percentage.
- Test price, shipping, packaging, and product-cost changes separately.
- Use a consistent time period when comparing revenue and costs.
- Reconcile calculator inputs with the accounting records used by the business.
- Treat generic margin labels as context, not as universal industry benchmarks.
Related calculators
Use the COGS calculator to estimate direct costs, the net profit calculator to include operating costs, or the break-even calculator to estimate the sales volume needed to cover fixed costs.